Understanding The “Low Interest” Rate Credit Card

You have seen hundreds of these credit cards pile up in your mailbox month after month. “Low Interest Rate Credit Card only 6%.” After awhile you start wondering if the card is actually legitimate. Credit card companies will charge in the high teens to the mid-twenties for credit, what makes this card so special? They ask for you to just sign the agreement for and a low interest rate credit card will be on its way!

Why So Cheap?

What most of these credit card companies fail to explain is that the low interest rate credit card they are talking about is only at a low rate for a specified period of time. These “low” or “teaser” rates only have duration of up to one calendar year if you are lucky. After that period of time elapses, your rate balloons up to the mid-20's. This could wreak havoc on your finances should you decide to consolidate your other credit cards on to this one card. Your payments could triple if you are not careful.

Reading The Fine Print

Most credit card companies that imply “Low Interest Rate Credit Card only 6%” have a disclaimer on the back of the application that states what the rate will be once the offer expires. If you are savvy enough, you can request by phone a reduced fixed rate once you receive the card. Most people do not know they can save money just by contacting the credit card company and ask for a lower interest rate on their existing credit card. You should also check for a prepayment penalty should you have a zero balance once the time expires.

A good rule of thumb with low interest rate credit card is to contact their customer service and ask questions. Find out if there is a prepayment penalty or zero balance fees. Make sure that there is no expiration and if there is what happens the day after it expires. By asking all the appropriate questions up front you can save yourself hundreds of dollars later on.